February 15, 2019

Away We Go

For practical reasons, Bill and Melinda Gates don't want lawmakers to get bogged down in arguments about the top marginal rate, which is currently 37 percent. "If you focus on that, you're missing the picture," Bill said in a recent interview with The Verge.

"In terms of revenue collection, you wouldn't want to just focus on the ordinary income rate, because people who are wealthy have a rounding error of ordinary income," he said. "They have income that just is the value of their stock, which if they don't sell it, it doesn't show up as income at all, or if it shows up, it shows over in the capital gains side. So the ability of hedge fund people, various people — they aren't paying that ordinary income rate."

Instead, he suggested, we should be more progressive with "the estate tax and the tax on capital, the way the FICA and Social Security taxes work. We can be more progressive without really threatening income generation." That idea might find favor with Sen. Elizabeth Warren, who has floated the idea of a wealth tax on households worth more than $50 million.

I still say, above a high threshold impose mark-to-market accounting to end the eternal deferral of unrealized capital gains taxes. But to avoid forced sales to pay the bill (and to create a buffer account against possible future losses) allow payment of the taxes over ten years.

Mark-to-market accounting is already part of the tax code (eg, futures and index options, not to mention the charitable deduction for appreciated assets with a long term gain.) This idea side-steps the Constitutional puzzle of Warren's wealth tax.

Comments

Mrs. -peter gave me a bottle of small batch Vermouth made on some winery in Sonoma County; it was based on a Gewurztraminer. I used some with some Calvados I've had in the house to make myself a very exotic dry brandy Manhattan. Pretty strong eye opener.

My FB friend Christopher Buckley (not THAT CB) has an interesting conjecture about the failed Amazon deal:Whadday I got for you tonight? How about a lot of facts and conjecture? I am no reporter, but I have pieced this together, some of it from very stale news, tell me how it smells...
Cuomo cut out the city council on the Amazon deal: no say, no credit, no nothing. The NY Senate Democrats got understandably VERY pissed at Cuomo, and bided their time... It seems that, for the deal to get approved, it had to go through a New York State Development Commission of some sort… You know about these things? Few people do. Little commissions that are holdovers from the days of machine politics that allow the following to happen.
The Senate Democrats appointed a guy known to be opposed to the deal to the commission. (A progressive? I guess, sure, why not?) By their rules (and I think there are three commishes), any one of them can queer any deal. Clever.
So how it got dead was this guy came out and said "we are gonna review it all". He didn’t say “I’m gonna kill it”. This was putting the knife in and was very smart. Why?
There were gonna be nonstop hearings and complaints and EVERYTHING would be public and on the table. THAT is why Amazon pulled the plug. (There is a lot more backstory and some of this may be a little whiffy, but there is the rotten story.
I am confident (no proof) that Bezos talked to Cuomo and said “just veto his appointment to the commission”, but even Cuomo isn’t that dumb. Instead, Cuomo went down to Trump a few days before the deal to see what could be done. Nothing. That's what. And THAT is what happened. Amazon had to end the pain or they would have put Bezos and Cuomo under the microscope for this terrible, awful deal.
Payback is a bitch.

Me, too. I think that the deal clarice discussed won't get publicity. I think that a lot of the dems are willing to let AOC take the blame for it because they are sick of her getting all of the attention and driving a foolish agenda.

Neat trick.
The Fed hands out trillions in free money over the last ten years to the richest among us and inflates giant asset bubbles under everything they own.
Now they magnanimously say, we feel we should pay a little back to be fair and all.

Took my son to a campout this evening and had no fun at all on I-80 and on all other roads as we had 3-4 inches today. On an icy uphill left turn lane just starting our journey, my son had to get out and push (to no avail) until he was joined by two nice Lincoln guys who did the trick--then he had to run and get in the car once it was properly moving! White knuckle stuff both ways, so I am very glad to be home and for him to be well deposited on the banks of the Platte!

i think they are under the impression that NY believes that amazon would beg to come back. i have another theory ... amazon wasn't in a hurry to build in NY anyway but it helped them with their "race problem".

My younger daughter and her squeeze are working May through September at Denali National Park's most far flung lodge; she'll be growing vegetables in the greenhouse and landscaping and he'll be doing something else (Travis is pretty handy with things). They'll have to wear bear spray at all times.

since everyone seemed to have something to hate about it, i might have to reconsider the other side ...wanted to be crabby about it, but when the Blonde Scarecrow started bleating ... whoa, maybe i don't want to be on that side.

rich, I still go back to Mike Huckabee's comment on Life, Liberty and Levin that Trump, by not owing any of the usual suspects a damn thing because he financed his own campaign, is free to do the wishes of the base. He said since both sides are in debt to the same people, that's why nothing gets done that we want.

I've done an almost complete 180 on Huckabee since DJT's election. Not complete because I never hated him so much as paid attention to the snarky comments by the Rear Admiral's hired help.

the plan would be to vacuum up a bunch of stuff on the '16 election and figure it out. my theory, such as it is, is that their were 2 factions-the executive office of the president and the hillary campaign and they started to work at cross purposes to one another. the question would be why ... i think that zero still thinks he can be our first african dictator and hillary wanted to start wwiii.

i hate them all and when i go to my dark place i'm going to open nukemap and drop a few hundred megatons on wdc ...

and the two factions goes to my other bugaboo ... the government within a government that zero created with his czars. talk about one of ryan's biggest failures-reining in some of that abuse.

the reason why is that we never did get much clarity on the executive office of the president hack back in '14 or '15 (powerline was about the only source but iirc it was confirmed that it was a major breach).

These oligarchs dont like to shell out big coin without results they gave 60 large to Manafort and probably another 40 to the dem side, Podesta welshed on the deal and didnt end up in the Potomac, Weber is a very quiet honey bee who might have gotten some results Manafort then hired the slimy Friedman and Saager (the ferengi who would sell their first born) to lobby soms officials

Jim nj,
Looks like the Lt was doing their job. Someone’s panties always have to be wadded. How dare the Lt develop amiable relationships with “extremists” from both ends of the spectrum. Complain because the Lt was nice. Complain because the Lt was an asshole. No-win situation.

"A year after the launch of the Defense Department's Close Combat Lethality Task Force (CCLTF), Army and Marine infantry may be moving closer to being transformed into an elite force, much like the 75th Ranger Regiment.

Retired Army Maj. Gen. Robert Scales, a key adviser to the CCLTF, told Military.com that he believes Marine Corps 0311 and Army 11B infantrymen should be recruited, selected, trained and treated as a specialized force."

I like this idea. Take an infantryman to higher standards of proficiency and pay him more. Create an advancement path within infantry so those that are good at it can advance in pay and importance as their skills increase.

We've done really well training up special forces. A well-trained elite just below them would be very useful.

I also like the comparison to submariners in the navy. They were treated well because of their more hazardous duty.

I take real offense at the dig, intentional or not, Karnitschnig takes at volunteer firefighters in his article about the Bundeswehr. American VFFs are the backbone of the fire service in this country. The vast majority of those I’ve had the pleasure of observing/knowing are professional in every sense except for being paid. They are fantastic people.

Mark-to-market accounting is already part of the tax code (eg, futures and index options, not to mention the charitable deduction for appreciated assets with a long term gain.) This idea side-steps the Constitutional puzzle of Warren's wealth tax.

I'm not so sure the Constitutional puzzle is side stepped. Though it's nearly 100 years old, as far as I can tell, Eisner v. Macomber is still good law. In it, the court says regarding what is and isn't 16th-Amendment "income":

For the present purpose we require only a clear definition of the term "income," as used in common speech, in order to determine its meaning in the Amendment; and, having formed also a correct judgment as to the nature of a stock dividend, we shall find it easy to decide the matter at issue.

After examining dictionaries in common use (Bouv. L.D.; Standard Dict.; Webster's Internat. Dict.; Century Dict.), we find little to add to the succinct definition adopted in two cases arising under the Corporation Tax Act of 1909 (Stratton's Independence v. Howbert, 231 U.S. 399, 415; Doyle v. Mitchell Bros. Co., 247 U.S. 179, 185) — "Income may be defined as the gain derived from capital, from labor, or from both combined," provided it be understood to include profit gained through a sale or conversion of capital assets, to which it was applied in the Doyle Case (pp. 183, 185).

The Government, although basing its argument upon the definition as quoted, placed chief emphasis upon the word "gain," which was extended to include a variety of meanings; while the significance of the next three words was either overlooked or misconceived. "Derived — from — capital;" — "the gain — derived — from — capital," etc. Here we have the essential matter: not a gain accruing to capital, not a growth or increment of value in the investment; but a gain, a profit, something of exchangeable value proceeding from the property, severed from the capital however invested or employed, and coming in, being "derived," that is, received or drawn by the recipient (the taxpayer) for his separate use, benefit and disposal; — that is income derived from property. Nothing else answers the description.

Unless there's some wrinkle I'm not aware of, the supposed exception for the taxing on charitable deductions of appreciated assets seems to me to have nothing to do with to mark-to-market taxes on held assets. Taxing depends on the fair market value of the asset at the point it's transferred to the charity.

The claimed exception for futures contacts is somewhat closer. However the taxing is based on a specific and special aspect of future-contract accounting. Quoting a decision by the 9th Circuit court:

Section 1256 [the tax section dealing with future contracts] is premised on the doctrine of constructive receipt because the taxpayer who trades futures contracts receives profits as matter of right daily. Id. at 157, 1981 U.S.C.C.A.N. at 256. Under this doctrine, "[i]ncome although not actually reduced to a taxpayer's possession is constructively received by him in the taxable year during which it is ... made available so that he may draw upon it at any time...." Treas.Reg. § 1.451-2(a) (as amended in 1979).
. . .
Because of the unique accounting method governing futures contracts, the gains inherent in them are properly treated as constructively received.

The increase in a future contract's value is somewhat equivalent to dividends that are paid daily into the owner's account. They are immediately available for cash withdrawal. The gains (and losses) on future contracts are essentially realized daily.

Haven't seen you in awhile. Income wasn't originally taxable. The government funded itself primarily with tariffs and fees.

Once they decided to tax income, dividends were correctly classified as income.

As far as charitable gifts to charity go, you get to claim the current value of the gift including appreciation in value. The charitable group is responsible for the increased value of the gift including any capital gain. They would have to pay the capital gain, but as a non-profit they are exempt from capital gains taxes.

Charities seek out those situations because they can legally launder money.

As for mark-to-market accounts, cash flows out or in on a daily basis. But as TM fails to notice, your gain or loss is noticed when you close your position. In the meantime, the flows of cash are ephemeral.

From what I remember US taxes need to be apportioned. Which to my mind means that you can't target individuals with taxes.

So if a "wealth" tax is ruled legal, it would have to apply to everyone.